US Stablecoin Legislation Stalls: Why Washington Can’t Crack the Code

Washington's stablecoin stalemate drags on, leaving a trillion-dollar market in regulatory limbo.

The Core Impasse: Who Gets to Play Banker?

The fight boils down to a turf war. Should traditional banks have exclusive rights to issue stablecoins, or can non-bank tech firms enter the arena? Each side digs in, creating a legislative gridlock that stifles innovation and clarity.

The State vs. Federal Tug-of-War

While Congress dithers, states race ahead with their own frameworks. This patchwork approach risks creating 50 different rulebooks—a compliance nightmare for any company trying to operate nationally. It's the exact opposite of the "level playing field" politicians love to promise.

Global Ramifications: Ceding the Ground

Every month of delay is a gift to other financial hubs. The EU's MiCA framework is live, and Asia is moving fast. The US risks writing the rulebook for a financial revolution it won't lead—a classic case of regulatory myopia while the world moves on.

The Innovation Chokehold

Uncertainty is the ultimate innovation killer. Developers and entrepreneurs can't build the next generation of payment systems on a foundation of "maybe." Capital and talent flow to clearer jurisdictions, leaving the US ecosystem playing catch-up.

Until lawmakers move from political theater to pragmatic policy, the great American stablecoin experiment remains stuck in committee—proof that sometimes the most volatile thing in crypto isn't the asset, it's the bureaucracy meant to oversee it.

Wu Highlights Potential Risks In The GENIUS Act

Wu’s analysis emphasizes that the GENIUS Act has led to heightened global demand for US dollars and Treasury securities, which, while bolstering the dollar’s international standing, has also inadvertently benefited the Trump family and associates linked to the crypto industry. 

However, this development has opened new challenges for the oversight of dollar flows globally and raises concerns about the stability of the traditional financial system in the United States.

A notable concern is how the trading of crypto assets enabled by USD stablecoins has evolved into a complex and less observable method for the US to extract wealth worldwide. Wu asserts that this mechanism poses significant threats to the monetary sovereignty and financial security of other nations.

The GENIUS Act outlines reserve asset categories like bank deposits, short-term Treasuries, and repo agreements. However, the fluctuating values of these assets can lead to potential insufficiencies in reserves, particularly if Treasury prices decline. 

How Stablecoin Laws May Undermine The Industry’s Foundations

Wu also explained that addressing the challenges of fiat stablecoins, lawmakers are likely to instigate regulations affecting all crypto assets, including Bitcoin (BTC) and Real-World Assets (RWAs), since these assets rely heavily on stablecoins.

Currently, licensed financial institutions cannot directly engage in trading, clearing, or custody of crypto assets due to the lack of legal recognition, leaving these opportunities to unregulated private firms. 

This scenario has reportedly led to higher profits for unregulated actors while increasing pressure on banks and the broader financial ecosystem. Consequently, this dynamic has prompted government authorities to hasten stablecoin regulation.

Once crypto assets receive full legal recognition, banks are expected to step into the market completely. This shift WOULD enable banks and payment institutions to tokenize deposits, allowing them to directly link deposit tokens with traditional financial elements.

The overall trend in the US indicates a MOVE toward a system where heavily regulated banks establish stability. This shift would reportedly facilitate the principle of “same business, same regulation,” leading to diminished risks for the monetary and financial structure.

However, this transformation through stablecoin legislation may threaten the very foundation of the stablecoin industry itself. Wu concludes that in this context, it would be illogical for other nations to replicate the aggressive push for stablecoin development that the US has adopted. 

Featured image from DALL-E, chart from TradingView.com